Civil rights groups in Israel have expressed outrage at the announcement last week that a special undercover unit of the police has been infiltrating and collecting intelligence on Israel’s Arab minority by disguising its officers as Arabs.

It is the first public admission that the Israeli police are using methods against the country’s 1.3 million Arab citizens that were adopted long ago in the occupied territories, where soldiers are regularly sent on missions disguised as Palestinians.

According to David Cohen, the national police commissioner, the unit was established two years ago after an assessment that there was “no intelligence infrastructure to deal with the Arab community”. He said that, in addition, undercover agents had been operating in East Jerusalem for several years to track potential terrorists.

Israel’s Arab leaders denounced the move as confirmation that the Arab minority was still regarded by the police as “an enemy” – a criticism made by a state commission of inquiry after police shot dead 13 unarmed Arab demonstrators inside Israel and wounded hundreds more at the start of the second intifada in 2000.

In a letter of protest to Israeli officials this week, Adalah, a legal rights group, warned that the unit’s creation violated the consitutional rights of the Arab minority and risked introducing “racial profiling” into Israeli policing.

Although the police claim that only Arab criminals are being targeted, Arab leaders believe the unit is an expansion of police efforts to collect information on political activists, escalating what they term a “climate of fear” being fostered by the rightwing government of Benjamin Netanyahu.

Awad Abdel Fattah, general secretary of the National Democratic Assembly party, whose activists are regularly interrogated by the police even though the party is represented in the national parliament, said there was strong evidence that undercover units had been operating in Arab communities for many years.

“The question is, why are the police revealing this information now? I suspect it is designed to intimidate people, making them fear that they are being secretly watched so that they don’t participate in demonstrations or get involved in politics. It harms the democratic process.”

Secret agents disguised as Arabs – known in Hebrew as “mista’aravim” – were used before Israel’s founding. Jews, usually recruited from Arab countries, went undercover in neighbouring states to collect intelligence.

The Haaretz newspaper revealed in 1998 that the secret police, the Shin Bet, also operated a number of mista’aravim inside Israel shortly after the state’s creation, locating them in major Arab communities.

The unit was disbanded in 1959, amid great secrecy, after several agents married local Arab women, and in some cases had children with them, in order to maintain their cover.

But the mista’aravim are better known for their use by the Israeli army on short-term missions inside Arab countries or in the West Bank and Gaza, where they have often been sent to capture or kill local leaders.

Famously Ehud Barak, the current defence minister, was sent to Beirut in 1973 disguised as an Arab woman to assassinate three Palestinian leaders.

More recently, however, the army’s mista’aravim have come to notice because of allegations that they are being used as agents provocateurs, especially in breaking up peaceful protests by Palestinians in the West Bank against the separation wall.

In April 2005, during a demonstration at the village of Bilin, north of Jerusalem, Palestinians throwing stones at soldiers were revealed to be mista’aravim. They were filmed blowing their cover shortly afterwards by pulling our pistols to make arrests. The army later admitted it had used mista’aravim at the demonstration.

Palestinians claim that stone-throwing by mista’aravim is often used to disrupt or discredit peaceful demonstrations and justify the army’s use of rubber bullets and live ammunition against the protesters in retaliation.

Last week Jamal Zahalka, an Arab member of the parliament, warned other legislators of the danger that mista’aravim police officers would adopt similar tactics: “Such a unit will carry out provocations, in which the Arab public will be blamed for disorderly conduct.”

Mr Abdel Fattah said there were widespread suspicions that mista’avarim officers had been operating for years at legal demonstrations held by Israel’s Arab citizens, including at the protests against Israel’s winter attack on Gaza. He said they were often disguised as journalists so that they could photograph demonstrators.

He said a woman activist from his party had been called in by the police for interrogation after a demonstration last year in the Arab town of Arrabeh. “The officer told her, ‘I know what you were saying because I was standing right next to you’. And he then told her exactly what she had said.”

In his testimony to a government watchdog, the police commissioner, Insp Gen Cohen, said he had plans for the unit “to grow” and that it would solve a problem the police had in infiltrating Israel’s large Arab communities: “It’s very hard for us to work in Umm al-Fahm, it’s very hard for us to deal with crime in Juarish and Ramle.”

Several unnamed senior officers, however, defended their role in monitoring the Arab community, claiming the commissioner was wrong in stating that the use of mista’aravim inside Israel was new. One told Haaretz: “Existing units of mista’aravim have operated undercover among this population for about a decade.”

Orna Cohen, a lawyer with the Adalah legal group, said the accepted practice for police forces was to create specialised units according to the nature of the crime committed, not according to the ethnicity or nationality of the suspect.

She warned that the unit’s secretive nature, its working methods and the apparent lack of safeguards led to a strong suspicion that the Arab minority was being characterised as a “suspect group”. “Such a trend towards racial profiling and further discrimination against the minority is extremely dangerous,” she said.

Comments two years ago from Yuval Diskin, the head of the Shin Bet, have raised fears about the uses the police unit may be put to. He said the security services had the right to use any means to “thwart” action, even democratic activity, by the Arab minority to reform Israel’s political system. All the Arab parties are committed to changing Israel’s status from a Jewish state to “a state of all its citizens”.

Mr Abdel Fattah said: “This is about transferring the methods used in the West Bank and Gaza into Israeli to erode our rights as citizens. It raises questions about what future the state sees for us here.”